Wildfires Are Burning a Hole in Your Pocket. Here’s How to Mend It.

Electricity prices have risen 40 percent above inflation between 2018 and 2024. For the average Pacific Gas and Electric customer, roughly one-third of the monthly bill now goes toward wildfire-related costs. For Southern California Edison and San Diego Gas & Electric customers, about one-fifth of the bill is wildfire-related.

Because these costs are collected based on electricity usage, households that consume more electricity—often lower-income and inland households—pay more.

High electricity prices discourage customers from switching to electric vehicles, heat pumps, and clean electric industrial equipment. That slows climate progress and prolongs reliance on fossil fuels, which worsens air pollution and increases wildfire risk—creating a vicious cycle.

California’s legal framework plays a central role in driving these costs. The state’s electric utilities are held to a state constitutional standard called inverse condemnation. If utility equipment causes or contributes to a wildfire, utilities are financially responsible for all damages, regardless of whether they were reasonably trying to prevent the fire beforehand.

Utilities can recover these costs from customers if regulators find the utility acted prudently. If not, shareholders pay. Faced with massive potential liability or bankruptcy, utilities are strongly incentivized to overspend on wildfire mitigation, even when that spending is inefficient for customers.

Utility regulators have limited discretion. They cannot prevent ratepayers from covering wildfire damages and so are frequently required to approve billions of dollars in wildfire‑related projects. While the state has occasionally required utility shareholders to contribute, mechanisms like the state-created utility self-insurance Wildfire Fund do not sufficiently reduce ratepayer costs; they simply share costs among more ratepayers.

Electricity customers are now the single-largest source of wildfire prevention funding in California—providing more than three times the amount allocated through the state budget. Utility wildfire spending has become an inequitable and ineffective substitute for comprehensive wildfire policy.

As wildfire damage grows across the economy, state spending on firefighting has surged. California’s firefighting budget increased 86 percent between 2017 and 2025, from $2.2 billion to $4.2 billion annually.

Fully funding firefighting is essential to protect lives and property. But spending on wildfire prevention has not kept pace. Between 2020 and 2029, California has budgeted only $5.1 billion on wildfire prevention. This is far short of what is needed to meaningfully reduce risk.

Rising firefighting costs are also crowding out other investments. For the next three years, fire suppression is anticipated to consume between half and all of the Greenhouse Gas Reduction Fund, limiting funding for public transit, clean air initiatives, and safe drinking water. This undermines climate action even as climate change worsens wildfires.

Wildfires are also destabilizing California’s insurance market. Home insurance premiums rose 25 percent between 2021 and 2024.

Many families can no longer secure private insurance and are forced onto the FAIR Plan, the state’s insurer of last resort. The FAIR Plan now covers more properties than any private insurer in the state, offering lower coverage at high cost—a clear sign of market failure.

When families are uninsured or underinsured, recovery after a wildfire becomes slower, more inequitable, and more disruptive to entire communities.

Wildfires are not merely budget problems. They destroy homes and businesses, take lives, displace families, and damage local economies. Even Californians who never see flames bear the burden through wildfire smoke and economic disruption.

Under the current system, wildfire damage is continuing to rise rapidly. Delaying reform makes solutions harder and more expensive. California must confront this reality and change course.

Last year, California passed a bill that required a study on society-wide remedies to reduce and spread wildfire costs equitably. California must improve the equity of who pays and when. Three pieces from the report must be a part of the solution.

1. Reform utility liability and cost recovery

California can no longer delay reforming how wildfire costs are embedded in electricity bills. Wildfires are now the top driver of electricity costs and the largest state source of wildfire prevention funding, which is paid regressively by electricity customers.

Changing inverse condemnation is one option but not the only one. Other approaches to reducing ratepayer exposure include expanding non‑ratepayer funding for wildfire costs, rightsizing attorney fee recovery, limiting certain categories of damages, eliminating insurance subrogation, and creating a state utility insurance backstop. The bottom line is that electric bills cannot absorb more wildfire costs. 

2. Stabilize insurance markets and the FAIR Plan

California must stabilize private insurance markets and strengthen the FAIR Plan through an all‑of‑the‑above approach. This includes scaling infrastructure, regulations, and programs that reduce risk. Some measures will require financial contributions from homeowners, local governments, and the state and should be paired with targeted assistance for those with less ability to pay. Insurance reforms should include better price transparency and prevent FAIR Plan member insurers from recouping costs from non–FAIR Plan policyholders. For the state’s FAIR Plan, stabilization could mean retaining the plan’s surplus of revenues after paying out claims, strengthening plan governance, and implementing a tax on insurers, agents, and brokers to use for risk-reduction projects.

3. Fund wildfire prevention more equitably

California needs new progressive sources of state budget spending and better use of existing spending to prevent wildfires and protect communities. A few legislators are already looking at restoring an annual wildfire prevention fee on property owners and enabling local governments to use revenues to attract private capital for prevention projects. These tools would support sustained investment in home hardening and community scale prevention, reducing damage once fires start.

Together, these reforms can break California’s wildfire cost spiral by preventing future damage, saving lives, and distributing costs more fairly. These reforms would also help stabilize electricity and insurance bills while strengthening community resilience.

The costs of delay are growing. The time for action is now.